The resource dependent provinces are grappling painfully with their exploding budget deficits. The provincial red ink reflects the drop in oil royalties, personal and corporate tax revenues and property taxes. In addition, rising unemployment burdens government spending on human services. Alberta (AB) has no sales tax, but in Newfoundland and Labrador (NL) revenues from this source as well have stalled. These fiscal burdens far exceed the rise in federal transfer payments to what are now ‘have-not’ provinces.
Both provinces brought down budgets today, but they are taking vastly different approaches to the budgetary red ink. Alberta’s NDP government has offered fiscal stimulus to boost economic activity, while the Liberal government in NL has stressed the need for fiscal austerity, with across-the-board tax hikes and government spending cuts. Nevertheless, in both provinces, budget deficits will remain for years to come.